Prevailing risk factors, however, could have a negative impact going forward, according to the Agricultural Business Chamber (ABC) and the Industrial Development Corporation, which compiled the index. The expected bumper summer grain harvest has had a positive impact on the index, as producers are in a favourable position to extend operations, increase their mechanisation and acquire new technology.
Lindie Stroebel, ABC’s manager for economic intelligence, said the positive expectations for agriculture will ripple through to other industries and could result in greater labour absorption in the sector. The livestock industry has, however, been exempt from confidence growth where certain areas have had less than favourable rain to maintain grazing capacity.
She said high grain prices and the effect of the weak economy and lower demand point to a further margin squeeze on the livestock industry. The export market have fallen prey to a strong rand and weak demand in the Euro zone, and exporters are now focussing more on local markets. This is having a negative impact on growth in volumes exported. “As a result, the [local] fruit sector is seriously considering markets in the Far East and Middle East and this significant change in export focus could contribute to expanding export potential in future,” said Stroebel.
Meanwhile, Francois Strydom, managing director of Senwes, said the Competition Commission’s investigation into the agricultural value chain doesn’t bode well for agribusiness confidence, as it is hindering companies from investing in SA’s agricultural value chain and they are looking for opportunities that carry less risk.
Stroebel concluded that the biggest constraint to confidence is the negative expectations for economic growth in SA. “The agribusiness sector depends on a growing economy for employment so that the buying power is maintained,” she explained.
